What is the Prohibition of Illegal Gambling Businesses?
In the United States, the federal and state governments regulate legal betting on sports, horse races, and other events. Meanwhile, there has been a long-standing rise in illegal gambling through 'bookies.'
The US government primarily focuses on illegal gambling businesses rather than individuals. Federal law governs licensed companies that accept bets and operate gambling activities.
Assessing the legality of gambling can be complicated because different laws sometimes conflict with each other and with state laws.
Usually, the federal government defers criminal gambling cases to state laws.
However, the federal government has separate laws regarding gambling, especially internet gaming. Violating these federal laws could result in federal criminal charges with severe penalties.
Unlawful Federal Gambling Charges
Owning, operating, financing, or managing an illegal gambling enterprise is regarded as a serious crime in the United States.
If you face federal gambling charges, understanding the severe penalties underscores the importance of seeking experienced legal representation to protect your rights and future.
Most states, including California, have particular laws concerning illegal gambling operations. Yet, as mentioned, gambling venues often breach federal laws against illegal gambling businesses outlined in 18 U.S. Code § 1955.
In many cases, the federal government will defer to federal charges against the defendant. Convictions for operating or owning such a scheme may result in property seizures, heavy fines, and up to 5 years' imprisonment. Our federal criminal defense attorneys will provide further details below.
What Defines an Illegal Gambling Business?
Under 18 U.S. Code § 1955, an illegal gambling operation is defined as any business that satisfies these three requirements:
- It breaches the laws of the state or local jurisdiction where it is situated.
- It includes a minimum of five individuals who fund, own, or operate the business; and
- It functions continuously for a minimum of 30 days and earns at least $2000 in gross revenue on any of those days.
A key distinction is that federal investigators are not required to wait 30 days before investigating an alleged illegal gambling operation.
Federal law states that probable cause can be established once a gambling business with five or more people runs for more than two consecutive days and makes at least $2000 in a single day.
This means prosecutors can start obtaining warrants and planning searches and seizures as soon as they identify the activity.
Under federal law, "gambling" encompasses a wide range of activities, including but not limited to bookmaking, slot machines, dice games, lotteries, pool-selling, roulette, and similar gambling activities.
Illegal Gambling Businesses in CA - PC 330
To determine if a gambling business is illegal in California, the federal government refers to California Penal Code 330 PC, which defines illegal gambling (gaming) as:
- A banking game (where a bank or house plays an active role in the game); or
- A game based on percentages where the house takes a cut of the bets
Prosecuting Illegal Gambling as a Federal or State Crime
Many enterprises breach both state and federal gambling laws. Although federal authorities usually defer to state law in prosecuting most crimes, they often pursue federal charges against illegal gambling operations due to various reasons, including:
- The business's size and scope, particularly if it earns over $2000 daily and involves more than five people in its operations;
- Whether the gambling business includes interstate transactions, which is quite common.
The federal government usually takes the lead in these cases because it's simpler for users, bookies, and operators to cross state borders with their operations, making it hard to prosecute offenders under state laws.
Offshore online gaming regulations often contain nuances that distinguish legal from illegal gambling.
What Are the Penalties?
While the focus is often on the individual charged, family members or associates involved in illegal gambling operations may also face legal consequences.
Understanding that penalties can include fines, asset seizures, and imprisonment underscores the importance of legal guidance for all parties involved.
Investigations into illegal gambling typically fall under the jurisdiction of the Federal Bureau of Investigation (FBI).
Their main focus is on online gambling and sports betting. They often collaborate with law enforcement agencies such as the United States Marshals Service, the Internal Revenue Service (IRS), and various state gaming commissions.
What are the Related Federal Crimes?
Running an illegal gambling operation usually breaches various federal laws, leading to multiple charges in a federal indictment. These charges may include:
- Money Laundering (18 U.S.C. 1956): The process of using legitimate businesses to hide the source of illegally obtained funds.
- Racketeer Influenced and Corrupt Organizations Act (RICO) (18 U.S.C. 1961 et seq.): A law intended to enable the government to impose strict penalties on large or international criminal groups, which often engage in illegal gambling.
- Illegal Gambling Business Act (18 U.S.C. 1955): This law criminalizes owning, operating, supervising, financing, or managing illegal business gambling across the United States.
- Conspiracy (18 U.S.C. 371): Conspiracy is defined as an agreement between two or more individuals to commit a crime. Because federal illegal gambling operations typically involve five or more people, conspiracy charges are often applicable.
- Tax Evasion (26 U.S.C. 7201): Because many illegal gambling operations launder money or do not report their income, they often misrepresent their earnings and may be charged with tax evasion.
- Transmission of Wagering Information (18 U.S.C. 1084): This law, part of the Interstate Wire Act, prohibits using wire communications such as phone or internet to place bets.
- Travel Act (18 U.S.C. 1952): Engaging in illegal business across state or national borders, or using the mail.
- Unlawful Internet Gambling Enforcement Act (31 U.S.C. 5361 et seq.): It explicitly makes illegal gambling activities on the Internet a criminal offense.
What are the Possible Defenses?
Federal investigators often start building a case without informing you. Seeking advice from a criminal defense lawyer early can provide reassurance and help you feel more in control of your situation, reducing anxiety about potential penalties.
As mentioned, federal gambling laws contain many legal ambiguities that we could leverage in your defense. Some of the most common defenses against federal gambling charges include:
- Lack of intent: you might not have deliberately participated in the illegal activity.
- No knowledge: you were unaware or had no reason to suspect that the business you were involved in was illegal.
- Failure to fulfill the requirements for illegal gambling business: This includes cases where your operation involved fewer than five people, did not violate state laws, or never earned more than $2000 in gross revenue in a single day.
We might negotiate with the federal prosecutor to achieve a favorable result, but we'll need to review the specifics to decide the best approach.
Eisner Gorin LLP is located in Los Angeles County, and we assist individuals charged with illegal gambling operations in California and nationwide. Reach out to us for a case consultation.
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